DP8572 Spatial frictions

Author(s): Kristian Behrens, Giordano Mion, Yasusada Murata, Jens S├╝dekum
Publication Date: September 2011
Keyword(s): city-size distribution, markups, productivity, trade frictions, urban frictions
JEL(s): F12, R12
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=8572

The world is replete with spatial frictions. Shipping goods across cities entails trade frictions. Commuting within cities causes urban frictions. How important are these frictions in shaping the spatial economy? We develop and quantify a novel framework to address this question at three different levels: Do spatial frictions matter for the city-size distribution? Do they affect individual city sizes? Do they contribute to the productivity advantage of large cities and the nature of competition in cities? The short answers are: no, yes, and it depends.